Looking for a small business loan? Know what your lenders expect..
If you're a small business owner, there's no use in asking for a loan, right? We've been told repeatedly that it's nearly impossible to receive credit and many simply take it as a fact because it's what they've heard so many times from other business owners.
But what if the opposite was true, what would business owners say if there was money just waiting for worthy borrowers to ask for it...
I know it sounds like the beginning of an infomercial, but it's true...
"The money is there but there's no demand, fewer people are asking for loans." Brenten Witherby, loan officer for RLDC said.
According to a Barlow survey cited in the New York Times article To Get a Business Loan, Know how the Banks Think, 70% of small businesses hadn't applied for any credit this past year.
Witherby suggests that fear is the reason for the decrease in applications coming into his office, and that many are waiting to see what the future holds before seeking out any loans.
There's no need to be afraid to ask... as long as you come prepared.
Before a lender will sign off on anything, they need to know more than how much money you want.
"Do your homework," Witherby advises. "It's all about having a good plan that recognizes and addresses challenges."
Lenders want to know how you plan to use the loan, and more importantly, how you plan to make money to pay it back. This is where knowing the financial health of your company can open (or close) the door on your future small business loan needs.
Business owners need to understand the importance of cash flow -cash flow is king after all - and current cash flow projections. Owners also need to present gross annual sales, revenue, and account balances.
Having a firm grasp on your financial health shows that your business is able to see the trends and adjust accordingly- making lenders more likely to help you. While some owners feel like they're jumping through hoops throughout the entire bank loan process, it's for their best interest.
"Jumping through hoops to you, is due diligence to me," Witherby said. "We want to make sure that the company is in the best shape possible. At the end of the day, they're happy with the hoop jumping."
The money is out there, you just need to know how to ask.